Stock market witnessed a bloodbath today with the BSE Sensex tanking 723 points — its second biggest single day fall since Narendra Modi government took over – on huge sell-off by FIIs on concerns over GST and other reforms.
Across-the-board sell-off was triggered by concerns that reform process may get delayed as the key GST bill faces strong political opposition even as it got through Lok Sabha.
Slowdown in the services and manufacturing sectors as also persistent taxation worries added to the pressure.
Some traders said that conviction of hugely popular Bollywood actor Salman Khan in a 13-year-old hit and run case could also have been at play, as a large number of HNI investors and traders typically rotate their funds between stock market, real estate and film industry. Also see: Salman Khan
“Traders remained concerned due to prevailing conflict between the opposition and government over key bills in the parliament,” said Jayant Manglik, President of Retail distribution at Religare Securities.
The 30-share Sensex after opening a shade higher at 27,473.36 and advanced to a high of 27,501.15.
However, it succumbed to selling pressure and dipped below the 27,000-mark with blue-chip stocks ICICI Bank, ONGC, Cipla and ITC, among other plummeting. It touched a low of 26,677.64 before settling 722.77 points or 2.63 per cent lower at 26,717.37, the lowest in nearly 5 months.
This is the biggest single day fall in last four months after 855 points plunge on January 6. Besides, this is the second-biggest since Modi government took over on May 26, 2014.
The 50-share NSE Nifty crashed by 227.80 points or 2.74 per cent to close below 8,100-mark at 8,097.
Market Outlook by Vinod Nair, Head-Fundamental Research, Geojit BNP Paribas Financial Services
Consolidation can only end till we identify the extent of earnings downgrade and outcome of Land Bill and GST in Rajya Sabha. These will decide the immediate course of action. India is underperforming to EM peers led with concern of FIIs and outperformance of China. One among the reasons of the consolidation is downgrading of earnings post the Q3FY15 which was much lower than expected. Now this has extended to the poor expectation for Q4FY15 and cut in FY16E earnings.Market Wrap Up by Alex Mathews, Head Research, Geojit BNP Paribas Financial Services
The markets today witnessed huge sell off on the back of technical and sentimental reasons. The Nifty broke its 200 DMA at 8271 and the lack of any major triggers in both global and domestic front affected the sentiments negatively. Most of the heavy weight stocks were seen trading below their 200 DMA and the major selling were seen in the sectors like FMCG, Capital goods, IT and Banks.
Raising India VIX is a concern which is at 19.6700 up around 13.27%, suggesting uncertain market conditions ahead where the oscillator charts are yet to enter into the oversold region which can keep market outlook under threat.
Today we saw heavy carnage in the mid-cap and small-cap sector stocks, both indices lost 3.61% and 3.63% respectively, retail participants might have been stayed sidelines once the Nifty broke its crucial support at 8271, which caused the intensity of the fall. Investors are looking for strong support from domestic/foreign institutional investors in the days to come as the markets are very close to its bottom.
Today the HSBC services PMI data also came out which fell to a three month low of 52.40 in April from 53 in the previous month. But the level stood above the 50 mark, where below shows contraction.
Nifty closed at 8097 down around 227 points. The market breadth turned to negative as there were seen 593 stocks advancing against 2148 stocks declining.
All the sectors ended in red and the major losers were Capital goods and Realty which closed down around 4.19% and 4.18% respectively.
In the stocks’ front, the major losers were BHEL and Kotak Bank which closed down around 6.02% and 5.45% respectively whereas the buying was seen in Bharti Airtel, closed up around 0.59%.
The FIIs were sellers in the cash market segment on 05 May 2015, Tuesday, sold shares worth Rs 756.52 crore. The DIIs on the other hand they were buyers on 05 May, bought shares worth Rs 979.19 crore in the capital markets segment.
In European the investors’ major focus was the development in Greece and corporate earnings. The US index futures were trading in green.
GE Ship, JIndal Saw, Titan, Nucleus, Hero Motocorp, Merck, Sintex, Talwalkars and Blue Dart are some of the companies which may announce their earnings tomorrow.
(5 reasons why Sensex crashed)
On expectations of speedy reforms promised, the Sensex was on an upward spiral for over nine months and soared to an all-time high of over 30,000 points early in March this year.
However, it has lost over 3,300 points from its peak, wiping out more than half of the gains made since the change in government.
“The Sensex has lost nearly 2,400 points (over 8 per cent) in the last three weeks primarily on account of the concerns pertaining to the FIIs taxation (MAT) issue, the nervousness surrounding the March quarter earnings season, which hasfailed to surprise on the upside as yet and the possibility of a second consecutive year of weak monsoon,” said Hitesh Agrawal, Head of Research at Reliance Securities.
Traders said panic offloading at algo trading platforms added to the sell-off pressure. They added that in today’s case, a breach of the 200-day average (considered a strong support for Nifty) sparked strong selling on algo platforms.
“Strong selling on algorithmic trading platforms and constant selling by foreign investors on ongoing worries about retrospective taxes forced indices to close at the lowest level in 2015,” said Jignesh Chaudhary, Head of Research at Veracity Broking Services.
Closing of both the indices today were the lowest in the current calendar year.
Selling was widespread with all 12 sectoral indices tumbling in the range of 1.65 to 4.24 per cent. Capital goods, realty, power, bankex, metal, refinery and healthcare took the lead in slide.
Out of 30 Sensex stocks, 29 ended with loses, while only Bharti Airtel ended with gains.
BHEL was biggest loser on the index with a fall of 6.21 per cent, followed by ICICI Bank 4.95 per cent, L&T 4.68 per cent, Maruti Suzuki 4.20 per cent, NTPC 4.09 per cent, Cipla 3.96 per cent, ONGC 3.96 per cent, Axis Bank 3.88 per cent and Tata Power 3.74 per cent.
Among the BSE indices, consumer goods fell by 4.24 per cent, realty 4.04 per cent, power 3.67 per cent, bankex 3.66 per cent, metal 3.17 per cent, oil&gas 3.13 per cent, healthcare 2.93 per cent, auto 2.79 per cent, FMCG 2.26 per cent and IT 2.11 per cent.
The market breadth turned sharply negative as 2,147 stocks finished with losses, 590 stocks ended with gains while 110 ruled steady.
Foreign Portfolio Investors sold shares worth a net Rs 756.52 crore yesterday, as per provisional data.
Globally, weakness in Asian stocks on sluggish closing in Wall Street yesterday kept domestic markets under pressure.
Key indices in China, Hong Kong, Singapore, South Korea and Taiwan fell in the range 0.02 per cent to 1.62 per cent. Japanese market was closed today.
However, European markets were trading marginally higher in their afternoon trade.
Bond rout rattles all assets
(Reuters) A worldwide selloff in government bonds deepened on Wednesday, with the rise in yields to their highest level this year spreading unease across all asset classes and putting stock markets around the world under pressure.
European equities struggled to stop the rot after a rout on Tuesday, as soaring bond yields dampened any relief from a growing consensus that the damaging threat of deflation across the continent may be disappearing.
Instead, investors are not only rushing to get out of low or negative-yielding bonds, but are also questioning the rationale for holding equities in a slow growth environment as the high yields on offer relative to bonds evaporates.
Oil prices jumped to their highest this year, with Brent crude futures now up more than 50 percent from the multi-year trough plumbed as recently as January.
Even top-rated assets sank, with Germany’s 10-year yield rising to a 2015 high at just under 0.6 percent. The yield has more than tripled in a week and risen 10-fold in just three weeks, erasing all the gains made this year.
Benchmark 10-year yield on Spanish, Italian and UK government bonds also hit year highs. The 10-year U.S. Treasury yield was within three basis points of a 2015 peak too.
“Another bloodbath in developed fixed income,” Royal Bank of Scotland’s rates strategy team wrote in a note to clients.
Spain’s benchmark yield hit 1.96 percent, Italy’s 1.98 percent and Britain’s gilt yield broke through 2 percent.
Europe’s index of leading 300 stocks was flat on the day at 1,555 points, having touched a two-month low of 1,545. In choppy trading, Germany’s DAX was up 0.5 percent, having also hit a two-month low earlier in the session.
Corporate earnings results and surprisingly strong data showing Spain’s services sector growing at its fastest pace since 2000 helped cushion European stocks.
U.S. futures pointed to a flat open on Wall Street.
REFLATION
European markets failed to draw much comfort from Greece meeting an interest payment deadline on a 200-million-euro loan from the International Monetary Fund.
Athens is quickly running out of money and is trying to persuade euro zone partners and the IMF to extend further aid. A bigger test will be a 750-million-euro payment due on May 12.
Bonds have been among the best performing asset classes in recent years thanks to the unconventional policy easing steps taken by the world’s central banks, but signs are emerging that investors are tired of chasing ever-shrinking yields.
One of the most crowded trades in equities is also showing signs of crumbling. In the six months to the end of April, Chinese stocks doubled in value. On Wednesday they fell 1.6 percent, following the previous day’s 4-percent slump.
A major index of Asian shares is down 3 percent from a more than seven-year high on April 29. MSCI’s broadest index of Asia-Pacific shares outside Japan fell 1 percent on Wednesday, and Australian stocks ended down 2.3 percent .
The Dow ended Tuesday down 0.79 percent, the S&P 500 lost 1.18 percent, and the Nasdaq 1.55 percent.
“If the rise in yield resulting from dumping Bunds is compounded into other G10 government bonds by possible signs of oil-driven reflation currents, then stocks will have to take notice,” City Index chief markets strategist Ashraf Laidi said.
A broad bounce in commodities saw oil and copper prices rise to their highest levels so far this year.
Brent crude was up 1.3 percent on the day at $68.42 a barrel, with U.S. crude up 1.7 percent at $61.41.
In currencies, the dollar remained under pressure after data on Tuesday showed that the U.S. trade deficit widened sharply in April, suggesting the economy probably shrank in the first quarter.
The euro was the main winner, its allure brightened by the steep rise in euro zone bond yields. The common currency was up 0.5 percent at $1.1240.
The dollar index was down a third of one percent at 94.813, retreating from a one-week high of 95.946.
Later in the day, Federal Reserve Chair Janet Yellen is scheduled to speak and markets will be super sensitive to any guidance on the outlook for the first hike in interest rates.
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